GM, Ford and DaimlerChrysler have all produced significantly fewer cars than light trucks and SUVs in recent years, in part because the heavier gas-guzzling vehicles offered significantly higher profit margins.
Meanwhile Toyota has been making healthy profits on fuel-efficient cars as well as trucks and SUVs. Toyota and other foreign makers also pioneered a new category of crossover vehicles - small, fuel-efficient SUVs like the Honda's CR-V and Toyota Rav 4.
Through August, DaimlerChrysler sold 470,000 passenger cars this year, compared with 1.15 million light trucks and SUVs, according to Autodata Corp., while Toyota sold nearly a million passenger cars and 710,000 light trucks and SUVs.
In an op-ed article for the Los Angeles Times in June 1998, Kitman warned car makers chasing the SUV market that an energy crisis would catch them flat-footed if they didn't invest more in smaller cars. And that is exactly what happened earlier this year, shortly after gas prices skyrocketed and people stopped buying gas-guzzlers.
Chrysler admitted as much in a warning this month to analysts and investors that it would post a stunning $1.5 billion loss for the third quarter, twice what it had anticipated.
(GM lost $2.9 billion in the first half of this year while Ford lost $1.44 billion.)
"In the third quarter, the Chrysler Group was unable to follow customer demand with its existing product portfolio, as customers shifted toward smaller vehicles," the company said in a statement.
After losing $10.6 billion in net sales last year, the Chrysler Group announced last week that it would cut deliveries to dealers by 24 percent, or 90,000 cars, in the third quarter because it is stuck with too much inventory after a slow summer.
Kitman said the auto industry is too focused on short-term results, and needs to think - and invest - for the long term.
"The thing that's sad is, it's not like they can't build better cars," Kitman said.
Kitman also blames U.S. car manufacturers for not reinvesting in existing products. Toyota and Honda replace their Corollas and Civics, respectively, every four years, he said, while Ford only redesigned the Taurus in 1996, a decade after it was first introduced. The model will be discontinued next year.
"Only the most patriotic customers are going to overlook that," Kitman said.
To survive, the onus is on the U.S. automakers to come up with cars that consumers want: fuel-efficient, with luxuries they can afford.
"The domestics have to continue to produce new and innovative products," Edwards said. "For the people they lost over the last 10 years to Korea and Japan, they have to win them back."
In response, the Chrysler Group plans to offer U.S. consumers eight new vehicles in the second half of the year, including smaller ones such as the Dodge Caliber, launched in the second quarter, and the Jeep Compass and the Jeep Patriot, which boast 30 miles per gallon highway mileage. It will also introduce the "smallest Dodge SUV in history," the Dodge Nitro.
Other models stirring up some excitement are GM's Saturn convertible, the Sky, and the Ford Edge, which like the Dodge Nitro is a new entry into the crossover SUV market. Ford plans to offer another new crossover model in 2008 based on its Fairlane concept.
Some older brands and models may go the way of the Oldsmobile, which GM discontinued five years ago, but Edwards said such decisions aren't made overnight. Ford has announced it will discontinue the Mercury Monterey minivan this year and the Freestar minivan next year.
Hybrid technology, which uses a combination of electricity and gas as the power source, could save truck and SUV sales by offering fuel-conscious consumers big cars with more miles to the gallon. Auto makers hope Congress will offer tax rebates to encourage consumers to buy them, which would further help sales, Kitman said.
In Baltimore, GM is pouring $118 million into the Allison Transmission plant in White Marsh to manufacture hybrid transmissions for light trucks and SUVs.
Foreign automakers may play a role in the Detroit automakers' recovery. Analysts say potential relationships with foreign competitors around sharing parts, suppliers and even technology are in the works.
Chrysler tried to be proactive when it merged with Germany's Daimler-Benz AG in 1998. When the Germans first arrived in Detroit and slashed Chrysler jobs and shared technology, they seemingly sparked a healthy recovery. But the company got caught in the SUV trap, too. Now, the company is reportedly in talks with several Chinese companies about possibly building small cars for export around the world.
GM has been discussing a possible merger with Nissan and French-owned Renault SA, at the request of GM shareholder Kirk Kerkorian, who owns a nearly 10 percent stake in the company.
Meanwhile, the companies are trying to grow. GM is offering a 100,000-mile warranty on new cars. Chrysler has extended its employee discount to the general public.